Retention pressure for mutual funds

Despite surging stocks, mutual funds' assets under management just about edges up.

Mutual funds are having a problem retaining investors. The industry's total assets under management (AUM) has grown by a marginal one per cent or Rs 1,500 crore in November, despite a plethora of new schemes being launched to cash in on the booming bourses. The Bombay Stock Exchange Sensex gained 10 per cent in the month.

Analysts said since AUM reflects the total market value of the portfolio of funds, any deceleration in growth during a stock market boom could only mean investors have been cashing out.

A K Sridhar, chief investment officer at UTI Mutual Fund, believes retail investors, high networth individuals and corporates have been booking profit from the time the Sensex touched 6000 levels. 
 

Some have done well
Sr. No.	Mutual Fund	AUM as on		% Growth
		30/11/04	31/10/04
1	HSBC Mutual Fund	7194.5	6014.7	19.60%
2	Tata Mutual Fund	6043.4	5494.3	10.00%
3	DSP Merrill Lynch Mutual Fund	6241.3	5802.5	7.60%
4	HDFC Mutual Fund	14333.1	13769.5	4.10%
5	Standard Chartered Mutual Fund	9170	8960.4	2.30%
6	UTI Mutual Fund	20505.8	20079.3	2.10%
7	Franklin Templeton Investments	16373	16584.5	-1.30%
8	Prudential ICICI Mutual Fund	14461.3	14715.9	-1.70%
9	Birla Mutual Fund	8759.3	9195	-4.70%
10	Reliance Mutual Fund	9293.1	10554.5	-12.00%
	TOTAL	112374.8	111170.5	1.10%
Source: mutualfundsindia

"But funds which have declared good dividends haven't seen as much redemption as those that didn't," he said.

Debt schemes have reported outflows as net asset values have declined. Also, a lot of debt investments have shown losses in the recent past.

"As a result, there has been a shift from debt to floating rates funds and products outside the mutual funds domain," Sridhar said.

Among the top 10 mutual funds in terms of AUM as on November 30, 2004, HSBC has shown the highest gain of 19.6 per cent, followed by Tata Mutual Fund with a 10 per cent rise.

The reason for their gains is not too hard to explain, according to industry officials, as both the funds had used the initial public offer route to garner fresh inflows.

While HSBC garnered over Rs 600 crore for its floater fund launched in November, Tata Mutual Fund's Dividend Yield Fund IPO raked in over Rs 400 crore.

An analyst said this proves that appropriately positioned products will draw investments.

Others for whom AUM rose are DSP Merrill Lynch (7.6 per cent), HDFC Mutual (4.1 per cent) and Standard Chartered (2.3 per cent) and UTI Mutual Fund, the largest fund house in the country (2.3 per cent).

On the other hand, rising debt yields made things difficult for some fund houses.

Reliance Mutual, which is among the top ten fund houses according to assets, has seen its AUM drop by 12 per cent.

For Birla Mutual Fund, it was down 4.7 per cent, for Prudential ICICI 1.7 per cent and for Franklin Templeton 1.3 per cent.

Industry sources, however, presage a rebound. They see corporate investments returning to liquid and debt funds this month.

This, coupled with the increase in the net asset value of equity funds due to the rise in the market price of shares could improve the size of assets, they feel.